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Six ways to reduce minigrid costs by 60 per cent

A new study by Rocky Mountain Institute (RMI) shows how rural minigrids can rapidly scale across sub Saharan Africa by addressing key barriers and cost reduction pathways – reducing costs over 60 per cent by 2020.

More than 600 million people, 65 per cent of sub-Saharan Africa, lack electricity access with hundreds of millions more having only an unreliable and intermittent supply at best.

The traditional path of bringing power to these unserved millions is to expand the electricity grid, build new fossil-fuel-based power plants, and run transmission and distribution lines to far-flung villages, farms and homes. That model works in the developed world, yet the approach has not been as effective in sub-Saharan Africa and other developing regions for several reasons, including: high infrastructure costs, low ability of end-users to pay, disproportionately small end-use demand in villages and unreliable and intermittent electricity supplied via grid extension.

Alternative approaches like minigrids are being considered as a way to provide energy access to remote communities. These small-scale distribution networks, with local generation based primarily on solar PV power (and backed up by batteries or gensets) can provide reliable 24/7 power in isolated, rural locations.

“There’s a transformative effect that comes with larger, more reliable amounts of electricity – whether it’s grinding millet or cassava, washing coffee beans, running welding equipment or driving irrigation pumps. These are essential appliances for real economic growth in rural Africa, and the kind of development so many African governments and citizens are seeking,” said Kelly Carlin, manager at RMI.

RMI have identified a pathway to address these barriers and reduce minigrid costs by 60 percent.

While successful examples exist, minigrids have yet to scale across Africa. The barriers to scaling rural minigrids in Africa include high cost, an underutilisation of their generation capacity, expensive or unavailable financing and regulatory and policy barriers

Image from RMI

RMI have identified a pathway to address these barriers and reduce minigrid costs by 60 percent. According to the report, following this pathway would rapidly accelerate market growth for minigrids by cutting the cost of minigrid-produced power.

Ensure that the electricity generated is fully utilised. Focus on the productive use of electricity for activities like agro-processing by prioritizing areas with existing businesses and by supporting business growth that will use power.

Focus on customer acquisition and relationship management. Engage the community and local groups to sign up customers, inform them of opportunities and retain their business.

Cut costs of construction and operation. Cluster isolated minigrids together to improve efficiency, take advantage of remote monitoring technology and utilise local labor.

Enable low-cost financing. Increase the availability of, and reduce the cost of capital for, minigrid projects through standardized financing and coordinated government and development partner efforts.

Reduce regulatory barriers, costs, and risks. Create transparency and an enabling environment for off-grid electrification and minigrids in particular by setting clear and well-crafted regulations, fair and stable taxation and customs regimes and clear policies around grid extension.